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Brussels faces reality check as it prepares to overhaul tech rules

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Brussels’ ambitions for regulating Big Tech are about to clash with political reality.

On Tuesday, the EU will unveil its first major overhaul of internet rules in two decades. But announcing the package is just the beginning: achieving sufficient support among MEPs and member states, many of which rely on large online platforms for jobs, will be another matter. 

Europe is tackling the core business of the world’s largest online platforms, most of which are based in the US, so getting its way will by no means be straightforward.

There is a feeling in Brussels that Big Tech has become “too big to care” and that the internet we have now is not the one citizens envisaged. Pressure is also mounting to make companies such as Facebook and Apple pay more taxes, offer stronger privacy safeguards and give more space for rivals to compete.

The EU wants to regulate Big Tech on two fronts. First, the bloc wants large online platforms to police the internet better — or face millions of euros in fines if they fail to properly do so.

Some of the new legal responsibilities will include vetting third party vendors and sharing data with researchers and authorities on moderation of illegal content. Platforms such as Facebook will also have to be clearer about the ads they display online, revealing information about who is behind the publicity and why a user is being targeted by a certain ad.

Second, the EU wants to curb the power of online platforms such as Google and Amazon because it believes they have gained so-called gatekeeper status, which allows them to set the rules under which they compete against smaller rivals. 

To do this, regulators in Brussels will come up with a list of banned behaviours as well as actions they want Big Tech to pursue to aid competition. This will include requiring platforms such as Amazon to share data they gather with third party vendors to ensure a level playing field. 

Margrethe Vestager, the EU’s executive vice-president in charge of digital and competition policy, and Thierry Breton, the bloc’s commissioner for the internal market, will present the landmark proposals on Tuesday after a series of delays.

They will then have to take the draft proposals for a walk in the European parliament, where MEPs are eagerly waiting to have a say. Many politicians will seek to push for even tougher rules. Do not expect consensus any time soon, if ever. 

Ms Vestager and Mr Breton will also face pushback from member states, which are reluctant to hand over too much power to Brussels. France and the Netherlands have already publicly supported the EU’s efforts. But experts expect countries such as Ireland, where large tech companies employ thousands, to question some of Brussels’ ambitions.

“EU countries will resist the European Commission’s monopoly on enforcement,” a seasoned legal adviser told the Brussels Briefing. “They will want their own piece of it.”

Momentum is building behind the EU’s proposals, however. Academics have for years advanced the idea that antitrust enforcement alone cannot tackle market deficiencies, arguing that new regulation is needed.

Politicians and regulators alike see a need to have a clear rule book for Big Tech to move away from the current models of lengthy but often ineffective probes into companies. The hope is that the new regime will lead to more timely action — and start to restore competition in rapidly changing digital markets.

Chart du jour: the hit from no deal

No-deal Brexit will hit different sectors than initial Covid-19 impact. Change in sectoral output

Areas in the north of England and the Midlands that backed Boris Johnson’s Conservatives in last year’s election are among the parts of Britain with the highest shares of jobs in sectors most at risk from the combined impact of a no-deal Brexit and the Covid-19 pandemic. The FT’s analysis found there were 6.86m jobs in sectors most exposed to the double blow of Brexit and Covid-19 — representing just under a quarter of Britain’s overall workforce. (FT)

Europe news round-up

  • Germany will go into a hard lockdown from Wednesday, with all schools and shops closed, as it battles to control a surge in coronavirus infections. “Corona has got out of control — we are at five minutes to midnight,” Markus Söder, prime minister of Bavaria, told journalists on Sunday. (FT, DW)

  • Finland and Norway have offered medical assistance to Sweden as their neighbour faces an increasingly severe second coronavirus wave that has stretched clinical staff and intensive care capacity to the limit in some areas. (FT)

  • The EU and UK have agreed to further extend their future relationship talks after making progress on cracking the crucial sticking point: the design of a mechanism to meet EU demands for fair competition without thwarting the UK’s determination to escape the bloc’s rules. (FT)

  • Europe’s top financial regulators are putting the finishing touches to new recommendations to allow the region’s strongest banks to restart dividend payments within strict limits, ending a nine-month hiatus imposed by the coronavirus crisis. (FT)

  • Robert Ophèle, chairman of Autorité des Marchés Financiers, has called for an overhaul to the supervision of asset management in Europe as the sector becomes an increasingly cross-border business. (FT)

Coming up this week

After the latest deadline came and went on Sunday, EU-UK talks will continue. Home affairs ministers and energy ministers will hold video calls on Monday.

On Tuesday and Wednesday, fisheries ministers hold their big annual quota-setting council — for the first time without UK waters up for discussion. The commission is also set to unveil long-awaited tech regulation overhaul, with the announcements of the digital services act and digital markets act.

On Wednesday, the EU is due to unveil its strategy for handling non-performing loans at banks.

Holiday notice: Wednesday’s edition will be the final one before the Brussels Briefing takes a festive break. We’ll be back in early January 2021.

javier.espinoza@ft.com@JavierespFT
sam.fleming@ft.com@Sam1Fleming





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Europe

German regulator steps in as Greensill warns of threat to 50,000 jobs

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Germany’s financial watchdog has taken direct oversight of day-to-day operations at Greensill Bank, as the lender’s ailing parent company warned that its loss of $4.6bn of credit insurance could cause a wave of defaults and 50,000 job losses.

BaFin appointed a special representative to oversee Greensill Bank’s activities in recent weeks, according to three people familiar with the matter, as concern mounted about the state of the lender’s balance sheet.

The German-based lender is one part of a group — advised by former UK prime minister David Cameron and backed by SoftBank — that extends from Australia to the UK and is now fighting for its survival.

On Monday night Greensill was denied an injunction by an Australian court after the finance group tried to prevent its insurers pulling coverage.

Greensill’s lawyers said that if the policies covering loans to 40 companies were not renewed, Greensill Bank would be “unable to provide further funding for working capital of Greensill’s clients”, some of whom were “likely to become insolvent, defaulting on their existing facilities”.

In turn that may “trigger further adverse consequences”, putting over 50,000 jobs around the world at risk, including more than 7,000 in Australia, the company’s lawyers told the court.

A judge ruled Greensill had delayed its application “despite the fact that the underwriters’ position was made clear eight months ago” and denied the injunction.

Greensill Capital is locked in talks with Apollo about a potential rescue deal, involving the sale of certain assets and operations. It has also sought protection from Australia’s insolvency regime.

Greensill was dealt a severe blow on Monday when Credit Suisse suspended $10bn of funds linked to the supply-chain finance firm, citing “considerable uncertainties” about the valuation of the funds’ assets. A second Swiss fund manager, GAM, also severed ties on Tuesday. Credit Suisse’s decision came after credit insurance expired, according to people familiar with the matter.

While the bulk of Greensill’s business is based in London, its parent company is registered in the Australian city of Bundaberg, the hometown of its founder Lex Greensill.

In Germany, where Greensill has owned a bank since 2014, BaFin, the financial watchdog, is drawing on a section of the German banking act that entitles the regulator to parachute in a special representative entrusted “with the performance of activities at an institution and assign [them] the requisite powers”.

The regulator has been conducting a special audit of Greensill Bank for the past six months and may soon impose a moratorium on the lender’s operations, these people said.

Concern is growing among regulators about the quality of some of the receivables that Greensill Bank is holding on its balance sheet, two people said. Regulators are also scrutinising the insurance that the lender has said is in place for its receivables.

Greensill Bank has provided much of the funding to GFG Alliance, a sprawling empire controlled by industrialist Sanjeev Gupta.

“There has been an ongoing regulatory audit of the bank since autumn,” said a spokesman for Greensill. “This regulatory audit report has specifically not revealed any malfeasance at the bank. We have constructive ongoing dialogue with all regulators in all jurisdictions where we operate.”

The spokesman added that all of the banks assets are “unequivocally” covered by insurance.

Greensill, a 44-year-old former investment banker, has said that the idea for his company was shaped by his experiences growing up on a watermelon farm in Bundaberg, where his family endured financial hardships when large corporations delayed payments.

Greensill Capital’s main financial product — supply-chain finance — is controversial, however, as critics have said it can be used to disguise mounting corporate borrowings.

Even if an agreement is struck with Apollo, it could still effectively wipe out shareholders such as SoftBank’s Vision Fund, which poured $1.5bn into the firm in 2019. SoftBank’s $100bn technology fund has already substantially written down the value of its stake.

Gupta, a British industrialist who is one of Greensill’s main clients, separately saw an attempt to borrow hundreds of millions of dollars from Canadian asset manager Brookfield collapse.

Executives at Credit Suisse are particularly nervous about the supply-chain finance funds’ exposure to Gupta’s opaque web of ageing industrial assets, said people familiar with the matter.

The FT reported earlier on Tuesday that Credit Suisse has larger and broader exposure to Greensill Capital than previously known, with a $160m loan, according to two people familiar with the matter.

Additional reporting by Laurence Fletcher and Kaye Wiggins in London



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FT 1000: Europe’s Fastest Growing Companies

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The latest annual ranking of businesses by revenue growth. Explore the 2021 list here — the full report including in-depth analysis and case studies will be published on March 22



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EU plans digital vaccine passports to boost travel

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Brussels is to propose a personal electronic coronavirus vaccination certificate in an effort to boost travel around the EU once the bloc’s sluggish immunisation drive gathers pace.

Ursula von der Leyen, European Commission president, said on Monday the planned “Digital Green Pass” would provide proof of inoculation, test results of those not yet jabbed, and information on the holder’s recovery if they had previously had the disease.

“The Digital Green Pass should facilitate Europeans‘ lives,” von der Leyen wrote in a tweet on Monday. “The aim is to gradually enable them to move safely in the European Union or abroad — for work or tourism.”

The plan, expected to be outlined this month, is a response to a push by Greece and some other EU member states to introduce EU “vaccination passports” to help revive the region’s devastated travel industry and wider economy. 

But the commission’s proposed measures will be closely scrutinised over concerns including privacy, the chance that even inoculated people can spread Covid-19, and possible discrimination against those who have not had the opportunity to be immunised.

In an immediate sign of potential opposition, Sophie Wilmès, Belgium’s foreign minister, raised concerns about the plan. She said that while the idea of a standardised European digital document to gather the details outlined by von der Leyen was a good one, the decision to style it a “pass” was “confusing”. 

“For Belgium, there is no question of linking vaccination to the freedom of movement around Europe,” Wilmès wrote in a tweet. “Respect for the principle of non-discrimination is more fundamental than ever since vaccination is not compulsory and access to the vaccine is not yet generalised.”

The travel sector tentatively welcomed the news of Europe-wide vaccine certification as a way to rebuild confidence ahead of the crucial summer season, but warned that regular and rapid testing was a more efficient and immediate way to allow the industry to restart.

Fritz Joussen, chief executive of Tui, Europe’s largest tour operator, said “with a uniform EU certificate, politicians can now create an important basis for summer travel”. But he added that testing remained “the second important building block for safe holidays” while large numbers of Europeans awaited a jab.

Marco Corradino, chief executive of online travel agent Lastminute.com, said he feared the infrastructure needed would not be ready in time for the summer season: “It will not work . . . at EU level because it is too complicated and would not be in place by June.”

He suggested that bilateral deals, such as the one agreed between Greece and Israel in February to allow vaccinated citizens to travel without the need to show a negative test result, had more potential.

Vaccine passport sceptics argue it would be unfair to restrict people’s travel rights simply because they are still waiting for their turn to be jabbed. 

Gloria Guevara, CEO of the World Travel and Tourism Council, said it was important not to discriminate against less advanced countries and younger travellers, or those who simply cannot or choose not to be vaccinated. “Future travel is about a combination of measures such as comprehensive testing, mask-wearing, enhanced health and hygiene protocols as well as digital passes for specific journeys,” she added.

A European Commission target to vaccinate 70 per cent of the bloc’s 446m residents by September means many people are likely to go through summer unimmunised.

While some countries around the world have long required visitors to be vaccinated against infectious diseases such as yellow fever, a crucial difference with coronavirus is that those inoculations are available to travellers on demand. 

Questions also remain about the risk of people who have already been vaccinated passing on coronavirus if they contract the disease.

 





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